Bank and its classes Bank – an institution that deals in money and its substitutes
and provides other financial services. Banks accept deposits and
make loans and derive a profit from the difference in the interest
rates. They also have the power to create money. The two major
classes of banks are commercial and central banks. Commercial
banks accept savings deposits, make loans and other invest-
ments, and offer financial services that facilitate the exchange of
funds among individuals and institutions. In addition to the profit
derived from the difference in the interest rates, commercial
banks charge fees for various services. Central banks are in-
volved in the issue of money and maintain the country’s foreign
currency reserves. Central banks maintain the accounts of other
banks and supervise their activities. Central banks act as bankers
to governments, as the designers of monetary and credit policies,
and as lenders of last resort to commercial banks in the case of a
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financial crisis. Central banks also play a significant psycho-
logical role as guarantors of the monetary system. Central banks
may be nationalized organizations and are subject to government
control, but some of them can have independence from
governmental supervision.
